urbanized without slum development. The Industrial Revolution (an era of mass urbanization that coincided with massive long term economic growth) 6 allowed for urbanization without slum formation. Slums have developed in nations where urbanization has occurred without equally quick economic growth, and in many cases FDI has not caused long-term economic growth for the host nation (rather the business owning developed nation). The formation of cities that will never be able to house their entire population is undeniably a current global issue. Urbanization can only be successful if wages and the costs of living are balanced. In cases where slums are formed wages are less than the formal cost of living, and hence informal housing or slums emerge. Housing can be considered a scarce resource; there is only a given amount at any time and only a given amount can be produced in any time frame. To combat the increasing scarcity of housing associated with ‘over- urbanization’ 7 slums are constructed. FDI has acted as a vehicle for global financialization. Financialization is ’an increase in the size and importance of a country’s financial sector relative to its overall economy’ 8 . This market fundamentalist approach offered an alternative to trade through which nations could interact and profit from market collaboration. 'Privatization, deregulation, free markets, free trade and minimal state interference and regulation' 9 became crucial to national development. In the 1980's FDI increased three times faster than the trade of manufactured goods 10 , necessitating the formation of financial centres in developed nations so that they, like developed nations, could profit from the neo-liberalist boom. Mumbai, Cape Town, Mexico City and Nairobi all would have to accommodate banks, markets, trans-national corporations and financial services in order straddle the now most profitable form of globalization. Wealth will always act as a poverty-magnet due to job creation, FDI in infrastructure and improving health and policing services. The introduction of urban poverty-magnets in poor nations will mean urban populations far surpass city housing capacity, causing slums of great magnitude to be formed. However, although the opportunism of developing nation governments played a key role in the turn towards market fundamentalism, debt burdens of developing countries almost made it a necessity for governments to enter these markets. FDI, most significantly throughout the 1980’s, created a source of funds from which a government could decrease it debt burden. FDI in this case would appear to have a predominantly positive effect. In the debt ridden 1980's developing nations severely reduced public expenditure on services and infrastructure therefore increasing poverty, inequality and decreasing the probability of obtaining even a small amount of economic growth. FDI was seen as a tool which governments could utilize in order to increase expenditure through shrinking their debts. Unfortunately this has proved not to be the case. The majority of FDI revenue inevitably retuned to the pockets of creditors, with little actually improving the lives of their domestic population. In 1982, the oil shocks of 1974 and high interest rates of the 1980’s created a global debt crisis 11 . The IMF and World Bank (organizations dedicated to ensuring global financial security) were called upon by the developing world for assistance. However the IMF and World Bank were aligned with western capitalist interests, and took this opportunity to demand the lowering of barriers to international cash flows (the majority of which rooted for the west). Developing nations who refused to adopt these structural adjustment programs (SAPs) would receive no assistance regarding their debt levels. The increase in FDI throughout the 1980’s was a result of this lowering of barriers, with western firms now cheaply and easily able to enter developing markets. Of the nations that obliged to SAPs, 46 became poorer than they were when the programs were initiated 12 . Investors took advantage of the debt crisis. The building of urban facilities through FDI ensured there would be a constant supply of human capital migrating from the increasingly poor countryside. With negligible economic growth and minimal new housing, there workers would fuel the expansion of slums.
6 http://prospectjournal.org/2012/05/21/neoliberal-policy-and-the-growth-of-slums/ 12/08/2014 7 http://prospectjournal.org/2012/05/21/neoliberal-policy-and-the-growth-of-slums/ 12/08/2014 8 http://www.investopedia.com/terms/f/financialization.asp 12/08/2014 9 David Harvey - A Brief History Of Neoliberalism, 2007 10 http://prospectjournal.org/2012/05/21/neoliberal-policy-and-the-growth-of-slums/ 12/08/2014 11 Vincent Ferraro, Melissa Rosser- World Security: Challenges for a New Century, 1994. 12 http://prospectjournal.org/2012/05/21/neoliberal-policy-and-the-growth-of-slums/ 28/08/2014
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